The purpose of the EKTAN is to provide intellectual food for thought on business strategy, technology, and current events, primarily in the wireless area. I am also available for more in depth consulting assignment in the telecom space. I'm currently consulting on projects and subjects that include: iDEN and CDMA technology, Nextel International, Sprint Nextel (without revealing any non-public or proprietary information), Alcatel-Lucent, and Motorola, and wireless industry dynamics, metrics and trends.

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NY Mets Facts or Trivia

George Herbert Walker, Jr., an uncle of President George W. Bush, was vice president and treasurer of the Mets from their founding through 1977.
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Answer to question below: Sid Fernandez.
What 16-game winner was relegated to bullpen duty by Manager Davey Johnson during the 1986 World Series?

May 31, 2008

Correction (June 4, 2008): In the analysis below, the first claim in the "selected
Pros" section is wrong. In taking notes on the Sprint 1Q08 earnings
call, I mistakenly heard CEO Dan Hesse say that an iDEN / WiMAX
Blackberry device would be delivered this year. In reality, Hesse said
am iDEN / WiFi Blackberry device would be delivered later this
year. This mistake was pointed out in a comment by "idenguy" on
Seeking Alpha. I do not know who "idenguy" is, but I thank him for the
correction. The implications of my mistake on my analysis is that,
while iDEN might indeed prove to be a logical underpinning voice play
for Clearwire in a bundled spin from Sprint, the product or handset
foundation supporting such a scenario remains to be built. I still
believe that a long term future of iDEN under Sprint ownership will be
hard to justify, given the inability of iDEN technology to evolve to
any form of broadband.

Sprint's current state of the business and challenges combined with externalities will determine the fate of Sprint over the next twelve months.

Analysis

It's been a few weeks since Sprint Nextel's 1Q08 earnings call and there seems to be a lull in any dramatic or negative news announcements. Sprint's debt has been rated junk, but that news was expected. So, without recapping all recent events (e.g., Clearwire venture), now might be a good time to take a breath and list some pros, cons, and facts that might provide some insights to the future.

First, some selected Pros:

WiMAX / iDEN Blackberry device to be delivered later this year: If there were doubts iDEN were to live, the announcement of this device, along with increased media spending for the iDEN network, and CEO Dan Hesse's 1Q statements supporting iDEN, add more to the credibility that: a) iDEN will not be shut down, b) iDEN customers will have a broadband solution, c) the unspoken strategy of having a forced migration of iDEN subscribers to CDMA is less likely, d) a spin of the Nextel / iDEN network to the Clearwire venture is more plausible with a dual mode WiMAX device on the roadmap.

Management: Although additional changes should have been made at the senior level and below, not to mention at least one more person at the board level, overall, there are positive changes afoot.

Now for some selected Cons:

and 2. Churn and Customer Satisfaction: Both remain persistently poor, especially customer sat. Despite Sprint's claims of improvement in customer sat during the quarter, at least one index places Sprint substantially below the competition. Although so many factors influence churn, such as network reliability, RF coverage, features, handsets, apps, etc., the customer experience with care and at the retail level is one where Sprint appears to continue to disappoint in a big way. The customer experience is the single biggest hurdle to overcome in Sprint's turnaround and is the primary reason for continued poor churn and net add performance, despite having finally gotten a handle on network and billing issues.

Now for some selected factoids (mostly from the earnings call):

iDEN has 3 million public safety customers, as of 1Q08

iDEN postpaid subscribers are 12.3 million, 15.7 million including Boost pre-paid, with an additional 1.6 million Power Source subs (these are dual mode iDEN PTT / CDMA voice and data phones). The iDEN network would appear to have quite a ways to go before it gets below the 10 million sub mark.

Based in part on the above, some linear logic, prognostications and bold predictions:

As stated above, the foundation continues to be built to support a potential iDEN spin to the Clearwire WiMAX entity.

It will take several more months for Sprint customer sat and churn to stabilize, perhaps 4Q08. If there's no improvement by then, expect continued deteriorating performance and, if no spin off of iDEN, cash problems.

Wide commercial rollout of Qchat and interoperability with the iDEN base starts late 4Q08.

A Nextel spin (or semi-spin into a JV, similar to the Clearwire structure), if it happens, will be late 4Q08 / 1Q09. If the iDEN subscriber base and overall customer sat has stabilized, then Sprint will be in a relative position of strength. If not, then an iDEN spin will be a distress sale. The timing of late '08 / early '09 also presumes that by that time, D Block rule making concludes and settles. There will probably be no iDEN spin to support any public safety purpose until at least the D Block rules are finalized or the block is re-auctioned. Any potential suitor interested in iDEN for public safety that might in any way be related to Cyren Call would be would never jeopardize or complicate the D Block license process with a premature bid for Nextel, unless blessed by the FCC.

ConclusionSprint has some positive underlying strengths, but the road to recovery will be long and take many more months. The moment when a number of factors that will determine Sprint's future structure will come together nine to twelve months from now, as Sprint's ability to function acceptably with the most basic level of customer care as a wireless provider will reach its moment of truth. Externalities comprised of suitors that will finally be ready to make a move for either piece parts or the whole of Sprint will drive this ongoing Sprint saga to resolution.